Why Gold’s Tumble Won’t Save You Any Money at the Jewelry Store

By Alexandra Wexler

Agence France-Presse/Getty Images

Gold futures have plunged 13% since Thursday, but don’t expect that gold necklace you’ve been eyeing to go on sale.

“The mark-ups on jewelry are massive,” said Mark O’Byrne, director at GoldCore, a physical gold retailer, in Dublin. “If you buy a ring or necklace or wristband, you’ll pay a premium for workmanship and craftsmanship.”

In addition, jewelers typically buy their materials in advance, meaning that any drop in the futures price won’t be reflected in their bottom lines for several months. For those reasons, “I wouldn’t see (the recent tumble in gold prices on Comex) having any material impact on the price of jewelry,” Mr. O’Byrne said.

Gold for June delivery on the Comex division of the New York Mercantile Exchange was recently 9.2% lower at $1,362.70 an ounce.

If prices drop another 10%-25%, then jewelers might lower prices, Mr. O’Byrne said. But “that is if the jewelers pass on the margin” at all, he said. “Smaller jewelers may have to lower prices, but if you’re a luxury jeweler, then they would tend to keep the prices up more.”

Mark Udell, chief executive of London Jewelers, an independent retailer with several locations including stores in Southampton and East Hampton, N.Y., said the costs of most of the products he sells don’t fluctuate with the price of gold. “There’s a big labor factor, a big design factor,” he said.

“There’s a lot to it–it’s not just putting it on the scale,” Mr. Udell said, citing extensive research and development costs for most luxury-brand items. But, for more generic products, such as simple gold chains, there will likely be a slight reduction in price, he said. For those items, “we will be charging based on the (price the) day we order it,” Mr. Udell said.

One exception to the “golden” rule is the Asian market for the shiny metal, where the price is much more competitive.

In India, gold jewelry is seen as an investment more than a fashion accessory. Consumers there “would know the spot price and know what the karat is” when shopping for a piece of gold jewelry, Mr. O’Byrne said. “They shop around, so you don’t have (the same) huge mark-ups over the spot value of gold.”

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